INT 220 Module Three Assignment - Japan

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INT 220 Module Three Assignment Template Economic and Political Environments Comparison Lucy Kelly INT 220 Global Dimensions in Business Dr. Matasha Murrell Jones Jan. 28, 2024

Section One When a company makes business decisions that involve international trade, it is essential to have a full picture of the country’s economic and political situation. Some information should be considered more than others. For example, the political system and economic classification are not as important as a country’s economic blocs when it comes to trade. The political system is important for creating positive trade relations, but the economic blocs and trade agreements directly impact imports and exports. When deciding whether or not to enter a country, the first thing to look at should be the trade agreements and economic blocs, because if there are high tariffs or if they are involved in a trade war or not part of a trade agreement, then business dealings would simply be impossible. Another factor that is of high importance for international business decisions is the Gross Domestic Product Per Capita. GDP per capita is important for seeing the average prosperity across the population of a country (The Investopedia Team, 2023). While the Gross Domestic Product is useful as a general calculation, it is more useful for a business owner to know what the GDP per capita is. The other important calculation is the Purchasing Power Parity, which is a way to compare pricing and currency exchange rates between countries (Investopedia, 2023). It is a way to see how much the same amount of money can buy in different countries. This is very important for making pricing decisions.

Section Two Category Mexico Germany Japan Political System Federal Republic Parliamentary Republic Constitutional Monarchy Economic Classification Mixed Economy (upper-middle income) Developing social market economy (high-income) Advanced social market economy (high income) Economic Blocs Impacting Trade FTAs with 50 countries: EU, USMCA, and Trans- Pacific GATT, WTO European Union World Trade Organization GATT World Trade Organization 16 EPAs Trans-Pacific GATT Gross Domestic Product $1,465,854.09 $4,082,469.49 $4,232,173.92 Purchasing Power Parity $19, 100 $53, 200 $40, 800 Gross Domestic Product Per Capita $11,496.5 $48,718.0 $33,823.6 Explanation of these insights (Dunung, 2019).  Political system: Explains the way a country is run.

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 Economic classification: a way of ranking each country based on economic status and income and a good way to see the country’s development.  Economic blocs impacting trade: explanation of the trade agreements between countries  GDP: total value of goods produced by a country in one year  PPP: a way to compare pricing and currency between countries to see growth and living standards (exchange rate)  GDP per capita: the average production across a country per producer (GDP divided across the population) Section Three If I were looking to sell baby safety gates, I would choose to sell first to Germany, then to Japan, and then to Mexico. My first reason for selling to Germany is the trade relationship between the U.S. and Germany. Germany has a very good relationship with the U.S.A., and so entering their market would be simpler than entering Japan. ( U.S. Relations with Germany , 2021). Also, Germany’s GDP per capita is very high, which means that people have a higher living standard and would be more likely to spend the money on a new baby gate. Germany’s Purchasing Power Parity is also very high, which means that the country’s economy is likely to be more stable especially when 0.92 euros equals one U.S. dollar while in Japan, 148 yen equals one U.S. dollar. Even though Japan has a higher GDP, it would be the second country I would choose to do business with. Shipping costs and tariffs might be lower in Japan, but their GDP per capita is lower than in Germany, so I believe that it would be safer to trade with Germany. Japan’s PPP is also lower, which is indicative of some income disparity, at least compared to Germany. Also,

Japan and Germany have a similar economic status, both with high income, but Japan’s monarchy is very different from the U.S.A., so that combined with the extreme cultural differences with Japan, make Germany a better trade partner. Mexico is the worst option for trade. Their GDP is a third of the other countries, and there is a lot of instability due to politics and poverty. They have the least amount of buying power which can be inferred from their PPP and their GDP per capita. Although shipping to Mexico might be easy since we share a border, ultimately, it would be more lucrative to trade with other countries.

References Central Intelligence Agency. (2023, July 1). Country Comparisons - Real GDP Per Capita . The World Factbook. https://www.cia.gov/the-world-factbook/field/real-gdp-per-capita/country-comparison/ Dunung, S. P. (2019). Global Business Management v1.0 . Flat World Knowledge. https://mbsdirect.vitalsource.com/books/978-1-4533-9363-5 GDP (current US$) . World Bank Open Data. (2022). https://data.worldbank.org/indicator/NY.GDP.MKTP.CD Investopedia. (2023a, August 21). What is purchasing power parity (PPP), and how is it calculated? . Investopedia. https://www.investopedia.com/updates/purchasing-power- parity-ppp/ The Investopedia Team. (2023, November 29). GDP per capita: Definition, uses, and highest per country . Investopedia. https://www.investopedia.com/terms/p/per-capita-gdp.asp Trade.gov. (2023, May 11). Country Commercial Guides - Trade Agreements . International Trade Administration. https://www.trade.gov/country-commercial-guides/mexico-trade- agreements#:~:text=Mexico%20has%2013%20Free%20Trade,Agreement%20for %20Trans%2DPacific%20Partnership . U.S. Department of State. (2021, June 23). U.S. relations with Germany . U.S. Department of State. https://www.state.gov/u-s-relations-with-germany/

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